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Notes
2
BUSINESS SUPPORT SERVICES
ave you ever observed the various activities performed by a businessman while carrying out the business operations? Look at the grocery shop of your locality. What does the owner do? He arranges funds, buys goods from the main market, carries those goods to his shop, stores those systematically and sells to the customers as per their demand. While doing all these activities the owner or the businessman needs various help or support from others. For example, he may take loan from bank, hire a tempo or truck in carrying the goods and so on. Thus, to carry out any business activity successfully various support services are required. Let us have an idea about those services and their operations. In this lesson we shall learn about the basic aspects like the meaning, importance and functioning of these support services.
OBJECTIVES
After studying this lesson you will be able to: explain the concept of business support services; identify various types of services; explain the importance of banking; identify different types of banks and the functions of a commercial bank; explain the importance and types of insurance; describe the meaning, importance and modes of transportation; explain the concept of communication, its importance and various means used for communicating; describe the meaning and importance of warehousing; identify the various types of warehouses; and explain the functions of warehouses.
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As stated earlier, the business support services refer to those business activities that act as auxiliaries to trade and facilitate smooth flow of goods from producer to consumer and the functioning of business as such. These include banking, insurance, transportation, warehousing and communication. Banking helps in providing finance and payment facilities, insurance to provide a cover to all sorts of business risks, transportation to facilitate physical movement of goods from one place to another, warehousing to provide storage facilities at various places to meet seasonal variations in demand, and communication for facilitating exchange of information and ideas between producers, middlemen and consumers. Thus, effectively, these business services are essential for smooth functioning of any business in any part of the world, and every person who is engaged in business must be fully aware of their functioning and use. Let us now learn about each one of these in detail.
INTEXT QUESTIONS 2A
1. State the meaning of Business Support Services. ______________________________________________________________ ______________________________________________________________ 2. Name the support service required in the following business activities. (a) Movement of goods and services. (b) Providing finance and payment facilities. (c) Coverage of business risks. (d) Storage of goods and making them available on demand. (e) Exchange of information and ideas.
2.2 BANKING
Bank is an institution that deals in money and credit. It accepts deposits from those who have funds to spare and grants loans and advances to those who are in need of funds for various purposes. Thus, banking refers to the various services provided by banks, such as acceptance of deposits, grant of loans and advances, and other supplementary services. Banking Regulation Act defines banking as accepting, for the purpose of lending or investment of deposits of money from the public repayable on demand or/and withdrawable by cheque, draft or otherwise. Thus, acceptance of deposits and lending or investing the same are two essential functions of a bank who act as an intermediary and deals with money belonging to the public. Of course, it provides many other financial services as clarified later in this chapter.
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(d) Specialised bank (e) Central bank Now let us have an idea about all these banks.
Notes
(a) Commercial Bank: Commercial Banks are banking institutions that accept deposits from the public and grant short-term loans and advances to their customers. Now-aday, the commercial banks have also started giving medium-term and long-term loans to trade and industry. Commercial banks may be (i) public sector banks, (ii) private sector banks, or (iii) foreign banks. (i) Public Sector Banks: In public sector commercial banks, the majority stake is held by the Government of India or Reserve Bank of India. Examples of such banks are: State Bank of India, Bank of Baroda, Syndicate Bank, Dena Bank, etc. (ii) Private Sectors Banks: In case of private sector banks, the majority of share capital of the bank is held by private individuals. These banks are registered as public limited companies. Example of such banks are: Jammu and Kashmir Bank Ltd., Lord Krishna Bank Ltd., ICICI Bank Ltd. Kotak Bank, HDFC Bank Ltd. etc. (iii) Foreign Banks: These banks are incorporated in foreign countries and operate their branches in our country. Example of such banks are: Hong Kong and Shanghai Banking Corporation (HSBC), Citibank, American Express Bank, Standard & Chartered Bank, ABN-AMRO Bank, etc. (b) Co-operative Bank: When a co-operative society engages itself in banking business it is called a Co-operative Bank. . The co-operative banks generally grant loans for productive purposes as well as for other purposes. The rate of interest charged is usually low. These banks are also subject to control and inspection by Reserve Bank of India. There are three types of co-operative banks operating in our country. These are: (i) Primary Credit Societies (ii) Central Co-operative Banks, and (iii) State Cooperative Banks. (c) Development Bank: Development banks are the financial institutions which provide medium and long-term loans to industry. Rapid development of industries in India after independence requiring huge financial investment and promotional efforts led to the establishment of these institutions. Development banks assist the promotion, expansion and modernisation of industries. Besides providing medium and long-term finance, these banks also subscribe to the capital issues of industrial undertakings. They also provide technical advice and assistance, if needed. Industrial Finance Corporation of India (IFCI) and State Financial Corporations (SFCs) are examples of development banks in India. (d) Specialised Bank: There are some banks which engage themselves in some specific area or activity and are thus, called specialised banks. Export Import Bank of India (EXIM Bank), Small Industries Development Bank of India (SIDBI), National Bank for Agricultural and Rural Development (NABARD) are examples of such banks.
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(e) Central Bank: In every country a bank which is entrusted with the responsibility of guiding and regulating the banking system is known as the Central Bank. Such bank is an apex bank and acts as the highest financial authority. In India, the central banking authority is the Reserve Bank of India. It does not deal directly with the members of public. It acts as bankers bank, maintains deposit accounts of all other banks and advances money to banks as and when needed. It regulates the volume of currency and credit, and has the powers of control and supervision over all banking institutions. The Reserve Bank of India also acts as government banker and maintains the record of government receipts, payments and borrowings under various heads. It advises the government on monetary and credit policy, and plays an important role in fixation of the rate of interest on bank deposits and bank loans. It is the custodian of currency reserves consisting of foreign exchange, gold and other securities. Another important function of the Reserve Bank of India is the issue of currency notes and regulation of the money supply.
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and may be termed as secondary functions of commercial banks. They are essentially non-banking in nature and broadly fall under two categories: (i) Agency services; and (ii) General utility services.
Notes
(i) Agency Services: Agency services refer to those services which are provided by commercial banks as agents of their customers. These include: Collection and payment of cheques and bills; Collection of dividends, interest and rent, etc.; Purchase and sale of securities (shares, debentures, bonds etc.); Payment of rent, interest, insurance premium, subscriptions etc.; Acting as a trustee or executor; and Acting as agents or correspondents on behalf of customers for other banks and financial institutions at home and abroad.
(ii) General Utility Services: General utility services are those services which are rendered by commercial banks not only to the customers but also to the general public. These are available to the public on payment of a fee or charge. These include: Issue of bank drafts, pay order (bankers cheque), travellers cheques; Issue of letters of credit; Safe-keeping of valuables in safe deposit locker; ATM card, debit card and credit card facility; Internet banking and phone banking; Sale of prospectus and application forms of various competitive examinations; Accepting telephone bills, electricity bills; Underwriting loans floated by government and public bodies; Supplying trade information and statistical data useful to customers; and Acting as a referee regarding the financial status of customers.
INTEXT QUESTIONS 2B
1. Name the bank which is termed as bankers bank. 2. Categorise the following under agency and general utility services of commercial banks. (a) Purchase and sale of securities. (b) Issue of letter of credit. (c) Issue of bank drafts.
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(d) Internet Banking (e) Collection of dividends Agency Services General Utility Services
Notes
Primary function
(a)
(b)
(c)
Agency Service
(d)
2.3 INSURANCE
You know that every business faces a variety of risks. For example, there may be injury to employees in job related accidents, goods may be lost in transit; there may be fire in the godown, and so on. In all these situations the entire loss is to be borne by the businessman or the owner. But, now-a-days, the risk of loss or damage is not entirely borne by the owner. The insurance provides protection against losses form such risk of the business for a nominal charge called premium. In other words, it helps the business in recovering losses which may arise due to various happening in the course of business, partly or fully from the insurance company. Before discussing in detail about insurance, let us first have a brief idea about the business risks, their nature and insurability. Risk is the possibility of loss or damage due to factors over which we have little or no control. Similarly business risk refers to the possibility of loss or damage on the happening of certain events which are beyond ones control. For example, while goods are transported from one place to another, there may be an accident causing damage or loss of goods. Similarly, there is a possibility that the trains may be derailed, bridge may collapse, aeroplane may crash due to an engine trouble, truck may be looted on its way to another city, or damage may be caused to goods sent by ship at the time of loading or unloading at sea ports. Again, a business may suffer loss or its profit may fall due to reduction in demand of its product because of change in the taste and fashion of the customers. The innovations of science and technology also bring about changes in the demand of a particular product in
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the market as happened in the case of demand for fixed line telephone which has declined due to the advent of mobile phones. The change in government policy, tax rates, interest rate etc. may also affect the earnings of a business. These are also the types of risks a business might face during its life-time. Now the question arises as to whether all these risks are covered by insurance. The answer is no. All types of business risks are not covered by insurance. Some of the risks discussed above are insurable while others are non-insurable. To be specific, the risk of loss due to fire, theft, earthquake, flood, etc. can be insured on payment of a nominal amount. These are called insurable risks. But, risk of loss on account of decline in demand of a product due to change in fashions, introduction of new products in the market or change of policy of the government cannot be insured. These are called non-insurable risks. The non-insurable risks are to be fully borne by the businessman.
2.3.1 MEANING
OF INSURANCE
The term Insurance refers to a contract between two parties, one known as insured and the other insurer, whereby the insurer in exchange of a fixed amount of money agrees to compensate the insured against risks of loss or damage caused by happening of certain events. The document containing the contract is known as Insurance Policy. The person whose risk is insured is called Insured or Assured and the person or the company which insures is known as Insurer,or Assurer. The consideration in return for which the insurer agrees to compensate the insured is known as Premium. Thus, insurance can be defined as a contract between the insurer and insured whereby the insurer undertakes to pay the insured a fixed amount, in exchange for a fixed sum of money (premium), on the happening of a certain event (like attaining a certain age or on death), or pay the amount of actual loss when it takes place due to the risk insured.
accidents leading to fatal injury, partial injury, disablement, as well as sickness and maternity. (e) Contribute to Economic Development: Funds with the insurance companies are invested in various types of securities and projects, which contribute to economic development of the country. (f) Generation of Employment: Insurance companies provide employment to a large number of people on regular basis. A number of people earn their livelihood working as insurance agents. (g) Social Security: Life insurance provides security against risks of old age and premature death of people. Besides, social security is provided to workers through the Employees State Insurance scheme whereby accidental risks are covered.
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becomes payable to the heirs of the insured after his death. Such a policy is taken up by a person who wishes to provide financial support to his/her dependents after the death. An endowment policy, on the other hand, runs for a limited period or upto a certain age of the insured, and the sum assured becomes due for payment at the end of the specified period or on the death of the insured if it occurs earlier. This is the most common form of life insurance policy taken up by the people. In addition to the types of policies discussed above, the insurance companies offer many other types of policies to attract the customers. Let us have a brief idea about some of these policies. (i) Joint Life Policy: Under this policy, the lives of two or more persons are insured jointly. The sum assured becomes payable on the death of any one, to the survivor. Usually, this policy is taken up by husband and wife jointly or by two partners of the firm. (ii) Money Back Policy: This scheme provides periodic payment to the policyholder unlike ordinary endowment insurance plans where the survival benefits are payable only at the maturity of the policy. For example, in case of a 20-year Money-Back policy, 20% of the sum assured becomes payable each after 5, 10, 15 years, and the balance 40% plus the bonus become payable at the 20th year. (iii) Pension Plan: Under this plan the sum assured is payable to the policyholder on his survival beyond the term of the policy. The sum assured or policy money becomes payable in monthly, quarterly, half yearly or annual installments. This is useful for those who prefer regular income after a certain age. (iv) Unit Plans: These plans offer twin benefits of investment and insurance cover. The premium paid by the policyholder is applied to purchase the shares and debentures of different companies. The maturity amount is largely depend upon the market value of the investment. (v) Group Insurance Scheme: Group Insurance schemes are meant to provide life insurance protection to the group of people at a low cost. These schemes are suitable for group of employees of any business house or any office. (b) Fire Insurance Fire insurance is a contract whereby the insurer, in consideration of premium, undertakes to compensate the insured for the loss or damage suffered due to fire. The premium is payable in single installment. The fire insurance contracts are generally taken up for one year. It automatically comes to an end after the expiry of one year. However, one can renew the policy every year by paying the premium on time. The claim for loss by fire is payable subject to two conditions, viz; (a) there must have been actual fire; and (b) fire must have been accidental, not intentional; the cause of fire being immaterial. The fire insurance contract is a contract of indemnity, that is, the insured cannot claim anything more than the value of property lost or damaged by fire or the
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amount of policy, whichever is lower. It may be noted that loss or damage by fire also includes the loss/damage caused by efforts to extinguish the fire with a view to minimise the loss. (c) Marine Insurance Marine insurance is an agreement by which the insurance company agrees to indemnify the owner of a ship or cargo against risks which are incidental to marine adventures. During an ocean journey, a ship is exposed to a variety of risks such as collision with other ship, collision of ship with hidden rocks, fire, storm, and so on. In all these situations, the entire loss is grouped into three categories: (i) loss to the ship; (ii) loss to the cargo; and (iii) loss of freight. Marine insurance that covers the risk of loss of cargo is known as Cargo Insurance. And when the owner of a ship is insured against loss on account of perils of the sea, it is known as Ship or Hull insurance. Further, the freight is usually payable by the owner of cargo on its safe delivery at the port of destination. So, the shipping company may also seek insurance of the risk of loss of freight. Such a marine insurance is known as freight insurance. (d) Other types of Insurance Apart from life, fire and marine insurance, general insurance companies insure a variety of other risks through various policies. Some of these risks and the different policies are outlined below. (i) Motor Vehicles Insurance: Insurance of passenger cars, vans, commercial vehicles, motor cycles, scooters, etc., covers the risks of damage of the vehicle by accident, loss by theft, and so also the liability arising out of injury to, or death of a third party involved in the accident. Infact, vehicle insurance in respect of third party is compulsory. Health Insurance: It provides protection against the medical expenses incurred on treatment of illness or injury suffered by the policyholder. It is also termed as mediclaim insurance, and is one of the most popular type of insurance now-a-days.
Notes
(ii)
(iii) Crop Insurance: It protects the farmers from the loss suffered due to crop failure in the event of drought or flood. (iv) Cash Insurance: It protects the banks and other business establishment against loss of money in transit. (v) Cattle Insurance: It covers the risk of loss due to the death of a cow, buffalo, heifer, bull, etc. caused by accident, diseases etc. (vi) Rajeswari Mahila Kalyan Bima Yojana: It provides relief to the family members of the insured women in case of her death or disablement. (vii) Amartya Siksha Yojana Insurance Policy: This policy is meant for the education of dependant children. In case the insured parents sustain any bodily injury which causes death or permanent disablement, the insurer shall provide for education of the dependent children of the insured.
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(viii) Burglary Insurance: Under this insurance, the insurance company undertakes to indemnify the insured against losses from burglary i.e., loss of moveable goods by robbery, theft etc.
Notes
(ix) Fidelity Guarantee Insurance: As a protection against the risk of loss caused by embezzlement or defalcation of cash or misappropriation of goods by employees, the businessmen may seek insurance covering the risks of loss on account of fraud and dishonesty on the part of the employees handling cash or in charge of stores. This is called fidelity guarantee insurance.
INTEXT QUESTIONS 2C
1. Mention the different categories of marine insurance. 2. Identify the insurance policies in the following cases. a) Policy taken up by husband and wife jointly. b) Periodic payment to the policyholder before the maturity of the policy. c) Protection from loss due to crop failure. d) Policy that takes care of the expenditure on education of the dependent children of the policyholder. e) Protection against misappropriation of goods by employees.
But, when he/she (the owner) has taken loan from a housing finance company to build his/her house, the housing finance company also has insurable interest in the house and it can seek its insurance. It may be noted that in case of life insurance, the insurable interest must be present at the time of taking the policy, in case of marine insurance insurable interest must exist at the time of loss or damage to the property, and in case of fire insurance, it must exist both at the time of taking the policy as well as at the time of loss or damage to the property. (c) Principle of Indemnity: The word indemnity means compensating somebody for the actual loss suffered by him; or restore someone to the same position that he/she was in before the insured event took place. This principle is applicable to the fire and marine and general insurance. It is not applicable to life insurance because the loss of life cannot be restored. The principle of indemnity implies that the insured is not allowed to make any profit from the insurance contract on the happening of the event that is insured against. Compensation is paid on the basis of amount of actual loss or the sum insured, which ever is less. Let us understand with the help of an example. A person insures his house against fire for Rs. 20 lakh. The fire takes place and he has to spend Rs. 5 lakh to repair the damage so caused. He can claim only Rs. 5 lakh from insure and not the sum assured. (d) Principle of Contribution: The same subject matter may be insured with more than one insurer. In such a case, the insurance claim to be paid to the insured must be shared or contributed by all insurers in proportion to the amount of sum assured by each one of them. If one insurer has paid the full compensation to the insured, he has the right to ask other insurers to share the loss proportionately. It may be noted that in case of multiple insurance, the insured can claim the loss from any of the insurers subject to the condition that the insured can not recover more than the amount of actual loss from all taken together. (e) Principle of Subrogation: According to this principle, once the claim of the insured has been settled, the ownership right of the subject matter of insurance passes on to the insurer. In other words, if the damaged property has any value, such property can not the allowed to remain with the insured because otherwise the insured will realise more than the actual loss which goes against the principle of indemnity. Hence, when goods worth Rs. 1,00,000 are damaged due to accident and the insurance company pays the full compensation to the insured, the insurance company takes the possession of that damaged property and is entitled to dispose off that property. (f) Principle of Mitigation: In case of a mishap the insured must take all possible steps to reduce or mitigate the loss or damage to the subject matter of insurance. This principle ensures that the insured does not become negligent about the safety of the subject matter after taking an insurance policy. The insured is expected to act in a manner as if the subject matter has not been insured. If appropriate steps are not taken to save the assets, then the insured may not get the full compensation from the
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insurance company. For example, if a house is insured against fire and the fire takes place, the owner must take all possible steps to extinguish the fire and minimise the loss. Similarly, when a house is insured against theft, he must take all precautions and steps to prevent theft. (g) Principle of Causa-proxima (nearest cause): According to this principle, the insured can claim compensation only if the loss is caused by the event insured against. In other words, unless the event insured is nearest cause (not a remote cause) for the loss occurred, the insured can not claim the loss from the insurance company. For example a ship carrying orange was insured against losses arising from accident. The ship reached the port safely and there was a delay in unloading the oranges from the ship. As a result, the oranges got spoilt. The insurer did not pay any compensation for the loss because the proximate cause of loss was delay in unloading and not an accident during the voyage.
INTEXT QUESTIONS 2D
1. What is meant by Insurable interest? ______________________________________________________________ ______________________________________________________________ 2. Name the principle of insurance violated in the following cases. (a) A does not own the building but is trying to get it insured as a party to the insurance policy. (b) A enters into life insurance contract with LIC of India. A was ailing with heart decease but he did not reveal this at the time of entering the contract. (c) B enters into insurance contract with two companies C and D. The subject matter is a building worth Rs. 5 lakh. The building caught fire and properties worth Rs. 3 lakhs were damaged. C paid the entire claim and asked D to share the claim. D denies. (d) Goods worth Rs. 50,000 are damaged and the insurance company pays the claim to Z for the loss. Z not only took the compensation for loss but also claims the damaged goods. (e) P takes an insurance policy for Rs. 1 lakh with Q company. The goods of P are damaged due to fire the loss incurred is Rs. 25,000. Q shall restore the actual loss but P claims full amount of the policy.
2.4 TRANSPORTATION
You are fully aware that the goods produced at one place may be used or consumed at various places as the markets for goods now-a-days are spread over length and breadth
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of the country and even extend to countries across the border. Hence the goods have to be carried from place of production to the place of consumption or use. The process of carrying goods and passengers from one place to another is termed as transportation and the mode used there for are roadways, railways, airways and/or water ways. In fact, transportation facilitates trading activities to create place utility to goods by removing the barriers of distance (hindrance of place) between production and consumption.
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movement may takes place inside the country or from one country to another. Movement of goods through inland waterways in India is highly limited because of unavailability of inland water ways and limited facilities. Transportation by sea and ocean is quite common in coastal areas and for international trade. It is relatively more economical for bulky goods to be carried over long distance. (d) Air Transport: Movement of goods and passengers by using aircrafts is termed as air transport. It is the speediest mode of transport and is mostly used for carrying passengers. As for goods, air transport is mostly used for goods of high value and low volume such as medicines, spare parts for machinery, electronic components etc. With the provision of large cargo planes, the use of air transport for goods has considerably increased within the country and for international trade.
INTEXT QUESTIONS 2E
1. Define the term transportation. ______________________________________________________________ ______________________________________________________________ 2. Suggest suitable mode of transportation in the following cases. (a) Transport of perishable goods within the country. (b) Transport of goods of high value and low volume. (c) Quickest mode for carrying passengers. (d) Convenient mode for short distance travel. (e) Economical mode of transport for long distance within the country.
2.5 COMMUNICATION
Communication is the process of transmission of ideas, opinions, thoughts and information through speech, writing, gestures or symbols between two or more persons. Communication always contains a message which is transmitted between the parties. There are minimum of two parties involved in communication - one is Sender, and the other is Receiver. The process of communication is said to be complete when the receiver receives the message and responds to it or acts according to it.
It is considered to be quite an effective and economical method of communication (both in term of money and time), and is most commonly used for internal as well as external communication. The major drawback with verbal communication is that it cannot be verified as normally it is not put on record. (b) Written Communication: When a message is transmitted through written words (in writing in the form of letters, telegram, memos, circulars, notices, reports etc. it is called written communication. It provides a record of the message and feedback which is available for verification as and when required. Normally, one is very careful to the point and precise while sending a written communication. However, it is formal, lacks personal touch and difficult to maintain secrecy. (c) Non-verbal Communication: Communication without any use of words is called non-verbal communication. Sometimes when you look at some pictures, graphs, symbols, diagrams etc. some message is conveyed to you. All these are different forms of visual communication. Bells, whistles, buzzers, horns etc. are also the instruments through which we can communicate our message. Communication with the help of these types of sounds is called aural communication. Similarly, communication is also made through some physical gestures through the use of various parts of the human body through body language. This is termed as gestural communication. Saluting our national flag, motionless position during the singing of national anthem, waving of hands, nodding of head, showing anger on face, etc. are all examples of gestural communication. When a teacher pats his student on his back, it is considered as an appreciation of his work and it encourages the student to do still better.
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(a) Mail Services The postal mail service deals with both inland and international mails. An inland mail is one where the sender and receiver of the mail reside within the same country. On the other hand, where the sender and receiver of the mail reside in different countries it is called an international mail. While sending a written message, the sender can make use of a post card, an inland letter, or an envelope. For sending some item in a packet, parcel post facility is provided. Articles in the form of printed materials, printed books, periodicals, greeting cards can also be mailed by book post. Besides these general mail services, some specialised mail services are also provided by the post office for convenience of the public. Let us know these services in brief. (i) Certificate of Posting: For ordinary letters, the post office does not give any receipt. But, if the sender wants a proof that he or she has actually posted the letter, then a certificate can be obtained from the post office on payment of prescribed fee which is called certificate of posting. These letters are marked as Under Postal Certificate (UPC). (ii) Registered Post: If the sender wants that the mail should definitely be delivered to the addressee otherwise it must return to him, then post office offers registered post facility. For this service, the post office charges additional amount and issues a receipt for the registered post. (iii) Insured Post: To compensate for the loss incase the letters or parcels get damaged or lost in transit, the post office provides insured post facility. For this the post office acts as an insurer. The insurance premium is paid by the sender. (iv) Speed Post: This facility provides quick, time bound as well as guaranteed mail delivery in some selected destinations on payment of additional charge. This facility is available in more than 1000 post offices in India and links with 97 countries. (v) Post Restante: When the exact postal address of the receiver is not known, the sender can avail of post restante facility. The letter can be sent to the postmaster of the locality where the receiver resides. The receiver can collect the letter from the post office on showing his identity. This facility is suitable for tourists and travelling salesmen who are not sure about their address in a particular place, or for any other person looking for a fixed address at a new place. (b) Financial Services Various financial services are provided by the post office through Saving Schemes, Remittance Services, and Distribution of Mutual Funds and Securities.
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(i) Saving Schemes: There are eight different schemes offered by the post offices to mobilise the savings from the public. These are: (a) Post Office Savings Bank Account (b) 5-Year Post Office Recurring Deposit Scheme (c) Post Office Time Deposit Account (d) Post Office Monthly Income Scheme (e) 6-Year National Savings Certificates (VIII Issue) Scheme (f) 15-Year Public Provident Fund Account (PPF Account) (g) Kissan Vikas Patra Scheme (h) Senior Citizens Saving Scheme 2004 (ii) Remittance Service: Money can be conveniently transferred from one place to other through the remittance service offered by the post office. It is in the form of Money Order and Postal Order facility with the help of which people can transfer money from one place to another within as well as outside the country. Money order is an order issued by one post office to another post office to pay a certain sum of money only to the person named therein. The sender hands over the money to the post office and on payment of the requisite fee, post office takes the responsibility of giving the money to the receiver. In a single money order form, we can send a maximum amount of Rs. 5,000. For the convenience of customers, post office offers different types of money order services like Ordinary Money Order, Telegraphic Money Order, Satellite Money Order, Speed-post Money Order, Instant Money Order (INO), International Money Transfer Services, etc. For the convenience of businessmen it also offers Corporate Money Order service. Like Money Order, we can also send money through postal order i.e., Indian Postal Order (IPO). It is a convenient method of sending money from one place to another and is mainly used for remitting examination fees or while applying for any job. (iii) Distribution of Mutual Funds and Securities: This facility enables the investors to purchase mutual funds and government securities through the designated post offices. The mutual funds of State Bank of India, prudential ICICI, RBI/Govt. Relief Bonds and ICICI Safety Bonds are available from 42 post offices at Bangalore, Chennai, Chandigarh, Delhi and Mumbai. (c) Insurance Services In addition to dealing with mail and remittance of money, post offices also provide life insurance coverage to individuals. There are two different schemes of insurance offered by post office. These are (i) Postal Life Insurance (PLI), and (ii) Rural Postal Life Insurance (RPLI). The Postal Life Insurance was introduced in 1884 as a welfare measures for the employees of Posts and Telegraphs Department. Later on it was extended to the employees of Central and State governments, public sector undertakings, universities, government
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aided institutions, nationalised banks and financial institutions, local bodies like Municipalities and Zilla Parisads. The employees of these organisations who are below 50 years of age, can insure their life on payment of a fixed premium for a particular period. The PLI offers five insurance schemes viz. (i) Suraksha (whole life insurance) (ii) Suvidha (Convertible whole life assurance), (iii) Santosh (endowment assurances) (iv) Sumangal (Anticipated endowment assurance), (v) Yugal Suraksha (joint life endowment assurance for couples). Just like PLI, the post office also provides life insurance coverage to the people living in rural areas at low premiums under the scheme of Rural Postal Life Insurance (RPLI). This was introduced on 24 March 1995. All the above mentioned plans are available under RPLI also. (d) Business Development Services Besides carrying mail through various means as discussed earlier, post office offers some special services to the business firms. Let us learn in brief about those services. (i) Business Post: In this service, post office undertakes all the pre-mailing activities of the bulk senders. Pre-mailing activities include collection from senders doorstep, insertion of goods in packet, pasting and addressing as well as franking of mails, etc. Media Post: The postal department offers a unique media to help the corporate and government organisations to reach the potential customers through media post. Under this facility, (a) advertisements are allowed on post cards, inland letter cards and in other postal stationeries, and (b) space sponsorship options on letter boxes.
(ii)
(iii) Express Parcel Post: Post office offers a reliable, speedy and economical parcel service to the corporate and business customers through its express post. It provides a time bound door-to-door delivery of parcels upto 35 kgs. in weight and VPP services upto Rs. 50,000. (iv) Direct Post: It allows the business houses to send the pamphlets, brochures and other advertising materials like CDs, floppies, cassettes, samples, etc. to the prospective customers at very low rates. (v) Retail Post: The post office offers the facility to collect public utility bills like telephone, electricity, and water bills, sale of application forms for government and other private organisations, survey through postmen, address verification through postmen are some of the activities undertaken under retail post. (vi) Business Reply Post: Under this facility post offices allow the customers to send their reply through business reply post, which does not require any postage from the sender. The post office recovers the postage from the addressee later on. (vii) Post Shoppe: Post shoppes are the small retail shops established for sale of postal stationery items, greeting cards and small gift items to the customers. These shops are found within the premises of some post offices. (viii) Value Payable Post (VPP): This facility is offered to meet the requirement of the traders who wish to sell their articles and collect the price of articles supplied by
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them through the post offices. Under this service, post office receives the properly packed goods from the seller and carries those to the customers. After receiving the total amount (the price of the goods plus the VPP charges) from the customer, it delivers the goods to him/her. Later on, the post office sends the amount due to the seller. (ix) Corporate Money Order: Like individuals, business organisations can also transfer money through money order. For them, the post office offers Corporate Money Order Service. It enables business organisation to transfer upto Rs. 1 crore to any part of the country. (x) Post-box and Post-bag Facility: Under this facility, a particular number and a box or a bag is allotted to the receiver at the post office to receive all unregistered mails. Post office keeps all mails addressed to that number in those boxes or bags. The addressee makes necessary arrangement to collect the mails as per his convenience. This facility is mostly suitable for business firms which want to receive their mail promptly. Those who do not have any fixed address or those who do not want to disclose their names and address can avail of this facility on payment of the specified rent. (xi) Bill Mail Service: It provides cost effective solution for mailing of periodic communication with nature of annual report, bills, monthly account bills or other items of similar nature. (xii) E-post: E-post service launched on 30th January, 2004 this has enabled people to send and receive messages through e-mail in all post offices of the country. To make it more useful for business, a corporate version of e-mail was also launched on 18th October 2005, which allows simultaneous sending of e-post to a maximum of 9999 addresses.
Notes
INTEXT QUESTIONS 2F
1. Give one word substitute of the following communication. (a) Conversation with the help of telephone. (b) Communication through symbols and diagram. (c) Traffic signal showing red light. (d) Sending SMS to friends through mobile phone. (e) Saluting our nation flag in different occasion. 2. Match the following Column A (a) Retail post
Business Studies
(ii) Compensation for loss or damage of the parcels (iii) advertisement on post card (iv) Collection of telephone bill (v) Sending pamphlets to prospective customers.
through voice mail. The receivers at their own convenience can get the message from the machines and take action accordingly. (g) E-mail: Electronic mail, popularly known as e-mail is a modern means of communication that transmits the written message, pictures or sounds etc. from one computer to the others connected through internet facility. (h) Unified Message Service: It is a system by which fax, voice mails and e-mails (all three) can be received from one mail box using telephone instrument, fax machine, mobile phones, internet browsers, etc. (i) Teleconferencing: Teleconferencing is a system through which people can interact without physically sitting in front of each other. People can hear the voice and see the picture of others and also respond to their queries while sitting in different countries. It makes the use of modern electronic devices like telephone, computers, television etc.
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(h) Sea and Air Navigation: Means of communication are extremely important for the navigation of ships and aircrafts which need to be guided from control rooms at particular locations.
Notes
(i) Spread of Education: Broadcasting of educational programmes radio and telecasting on televisions are popular means of educating students without the necessity of personal coaching. (j) Advertisement: Radio and television as means of mass communication have increasingly become important as media of advertisement for business firms as it is possible to reach the masses by such means.
INTEXT QUESTIONS 2G
1. Mention any two problems we may face in the absence of telecommunication services. (a) _____________________________________________________________ (b) _____________________________________________________________ 2. Complete the following incomplete words by taking clues from the statement given for each. Every blank represents one letter only. First one has been done for you. (a) T __ L __ X (TELEX) (b) V __ __ C __ MAIL (c) __ __ X (d) T __ L __ __ R __ M (e) E __ M __ __ __ Clues (a) Communication using tele-printer (b) Computer based system for receiving and responding the incoming telephone calls. (c) Machine that transmits hand written massage instantly. (d) A form of written communication. (e) Communication of written message through internet.
2.6 WAREHOUSING
The words warehouse and godown are synonymous and so warehouse refers to a place used for storing goods, and warehousing refers to the activities involving storage of goods on a large-scale in a systematic and orderly manner and making them available conveniently when needed. In other words, warehousing means holding or preserving
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goods in huge quantities from the time of their purchase or production till their actual use or sale. Thus, it creates time utility by bridging the time gap between production and consumption of goods.
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(b) Public Warehouses: The public warehouse is an independent unit which stores goods of other firms. Any one can store his goods in these warehouses on payment of rent.
Notes
(c) Government Warehouses: These warehouses are owned, managed and controlled by the government. Central Warehousing Corporation of India, State Warehousing Corporation and Food Corporation of India are examples of government warehouses. Both government and private enterprises may use these warehouses to store their goods. (d) Bonded Warehouses: Bonded warehouses to store imported goods for which import duty is yet to be paid. These warehouses are generally owned by dock authorities and found near the ports. (e) Co-operative Warehouses: These warehouses are set up by the cooperative societies for the benefits of their members. They provide warehousing facilities at the most economical rates.
(g) Transportation: In some cases warehouses provide transport arrangement to the bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery on request of the depositors.
Notes
INTEXT QUESTIONS 2H
1) Give the meaning of warehousing. ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ 2) Identify the type of warehouse in the following cases. (a) Warehouse to store the goods of public. (b) Warehouses owned and managed by government. (c) Warehouses for storage of imported goods on which import duty is yet to be paid. (d) Warehouses set up for the benefit of its members. (e) Warehouses owned and managed by private traders for stocking their goods.
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Types of Bank
Notes
Commercial Bank Public Sector Bank Private Sector Bank Foreign Bank
Cooperative Bank Primary Credit Society Central Cooperative Bank State Cooperative Bank
Central Bank
RBI
Insurance is a contract between the insurer and insured whereby the insurer undertakes to pay the insured a fixed amount, in exchange for a fixed sum of money. Based on the subject matter of insurance and nature of risk covered, insurance can be broadly classified as (a) Life insurance, (b) Fire insurance, (c) Marine insurance, and (d) Other types of insurance. Principles of insurance(a) Utmost good faith (b) Insurable interest (c) Indemnity (d) Contribution (e) Subrogation (f) Mitigation (g) Cause proxima
Transportation: The process of carrying goods and passengers from one place to another is termed as transportation. The mode used for transportation are roadways, railways, airways and water ways. Communication is the process of transmission of idea, opinion, thoughts and information through speech, writing, gestures or symbols between two or more persons. Based on the method used, communication may be oral, written or non-verbal. Communication without any use of words is called non-verbal communication. It may be visual, aural or gestural. The main services which help business in its effective communication are classified as postal services and telecommunication services.
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The various services provided by post offices are classified as (a) Mail services, (b) Financial services, (c) Insurance services, and (d) Business development services. The various special services offered by post office to the business firms are Business post, Media post, Express parcel post, Direct post, Retail post, Business reply post, Post shoppe, Value payable post, Corporate money order, Post Box and Post bag facility, E-post and Bill Mail service. The telecommunication which are helpful for business firms are fixed line phone, cellular service, telegram, telex, fax, voice mail, e-mail, teleconferencing. Warehousing refers to the activities involving storage of goods on a large scale in a systematic and orderly manner and making them available conveniently when needed. The different types of warehouses functioning in our country are Private warehouses, Public warehouse, Government warehouse, Bonded warehouse and Cooperative warehouse. The functions of warehouse are storage of goods, protection of goods, bears the risk of loss or damage to goods in storage, financing, processing, transportation. It also performs various value added services like grading and branding, mixing, blending and packaging of goods.
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3. Name the hindrance that is removed by transportation. 4. State the benefits of insured post.
Notes
5. What is bonded warehouse? Short Answer Type Questions 6. Mention any two general utility services rendered by commercial banks. 7. Distinguish between whole-life policy and endowment policy. 8. State any two points of importance of transportation for the business. 9. What is meant by post restante letter. 10. Explain any two functions of warehousing. Long Answer Type Questions 11. Explain the primary functions of a commercial bank. 12. Describe any two principles of a valid insurance contract. 13. What is meant by transportation? State any two different modes of transport. 14. Describe any four special services rendered by the post office for the benefit of business. 15. Explain any four points of importance of warehousing.
2. (a) Joint life policy (c) Crop Insurance (e) Fidelity guarantee insurance 2D
(b) Money back policy (d) Amartya Siksha Yojana insurance policy
Notes
1. Insurable interest means financial or pecuniary interest on the subject matter of insurance. 2. (a) Principle of insurable interest (c) Principle of contribution (e) Principle of Indemnity 2E 2. (a) Road transport (c) Air transport (e) Rail transport 2F 1. (a) Oral Communication (c) Visual Communication (e) Gestural Communication 2. (a) (iv) (b) (iii) (c) (v) 2G 2. (b) VOICE MAIL (d) TELEGRAM 2H 1. Activities that involve storage of goods on large scale and making them available when demanded. 2. (a) Public warehouse (c) Bonded warehouse (e) Private warehouse (b) Government warehouse (d) Cooperative warehouse (c) FAX (e) E-MAIL (d) (i) (e) (ii) (b) Visual Communication (d) Written Communication (b) Air transport (d) Road transport (b) Principle of utmost good faith (d) Principle of subrogation
DO AND LEARN
Visit the nearest post office of your area and collect information on the various services provided to the public and business community. Also collect pamphlets on the various saving schemes available.
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ROLE PLAY
Notes
Deeksha is working as an agent of life insurance and Sunita is working as an agent of General insurance. Read and complete the following conservation. Deeksha : Sunita, I heard that you are a GIC agent. Could you tell me what is the subject matter of insurance. Sunita : Well! Unlike the life insurance our subject matter of insurance is the goods that need risk coverage in business.
Deeksha : This is very interesting! Could you tell me more about it? Sunita : Yes, of course! I do not know anything about life insurance. First you advise me how should I proceed in taking a policy to protect my life?
In the light of the basic principles, different types of policies, continue the conversation between the two friends. You can take the role of one of the agents and ask one of your friends to enact the other role.
Chapter at a Glance
2.1 Business Support Services 2.2 Banking 2.2.1 Importance of Banking 2.2.2 Types of Banks 2.2.3 Function of Commercial Bank 2.3 Insurance 2.3.1 Meaning of Insurance 2.3.2 Importance of Insurance 2.3.3 Types of Insurance 2.3.4 Principles of Insurance 2.4 Transportation 2.4.1 Importance of Transportation 2.4.2 Modes of Transport 2.5 Communication 2.5.1 Types of Communication 2.5.2 Communication services 2.5.3 Postal Services 2.5.4 Telecommunication Services 2.5.5 Importance of Communication 2.6 Warehousing 2.6.1 Importance of warehousing 2.6.2 Types of Warehouses 2.6.3 Functions of Warehouses
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